Department store sector sees rapid growth in China

Despite facing ever-more competition from other formats and retail channels in recent years, department stores in China have flourished, new research reveals, with apparel purchases driving the growth.

Reflecting the increased wealth of Chinese consumers, and their increased disposable income, the country’s department store retail market has doubled in value in the last six years according to a new report from Mintel, rising from $50.6 billion in 2007, to $109.9 billion in 2012.

Indeed, around a third of urban Chinese shoppers now shop at a department store once a week or more, with a further quarter shopping in them 2-3 times a month.

Apparel tops the list of items purchased at department stores, with 92% of shoppers buying an apparel item. This is followed by accessories at 77%, with footwear coming in fifth at 72%. In addition, menswear (68%) just beats women’s wear (67%) in terms of next most purchased items.

“Department stores in China have not only survived within the context of the country’s recent rapid economic development, but many have flourished, including several department store chains,” says Matthew Crabbe, director of Asia Pacific Research at Mintel.

“Yet the market space they fill increasingly has to compete with other retail formats, such as specialist chains, hypermarkets and supermarkets, and growing numbers of new destination shopping malls and retail parks.

“This is making the competitive landscape increasingly difficult for department stores, and much harder for them to sustain their levels of interest among China’s shoppers.”

Looking to the future, online retail also offers strong growth potential – with some 97% of urban Chinese consumers now claiming to browse online department stores.

Over the past six months, researchers found half of consumers who shopped at online department stores purchased shoes, almost one in two (48%) women’s wear, 45% bought menswear, and 35% purchased athletic apparel, footwear and equipment.

Highlighting the importance of online apparel to the e-commerce market, Mintel’s research also reveals that online apparel retailing as a proportion of total China apparel market value has increased market share from just 2% in 2008 to 21% in 2012, growing market value from $27 billion in 2008 to $532 billion over the same period.

“Online retailing is growing fast in China, and while online retailing offers opportunities for department stores to reach more consumers, they need to find a distinct niche within the online market,” Crabbe adds.

“Focusing on the service reliability and brand quality of the core lines that make their physical stores successful can translate into added security and trustworthiness for online consumers.”

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